Using an automated day trader to generate income

Oh they're correct, I know some people who write those programs. But they don't publish their algorithms.

What is investing if its not a IF/THEN statement?

If price goes up then sell, if price goes down then buy. If the company meets these financial criteria then buy, if not then sell. If the price approaches a resistance level then sell.

Whether your basing the investment decisions on fundamental or technical analysis, either way its an IF/THEN statement at some level.

Matt1,

you're exactly right. its just a bunch of if then statements. I played with quite a few variations of a VERY simple, primitive strategy.

I'm the first to admit that that day's P&L was largely the product of luck. In fact, I had quite a bit of remorse after the fact and was thankful that the coin flipped my way that day.

Regarding predictive engines, you're definitely right as well. Most educated financial professionals don't believe tat you can predict future price movement with any degree of certainty, but there IS a fairly large following up that believes that price behavior is at least price reverting in the short term.

I got lucky, I basically flipped a coin and HAPPENED to do it on a day where the SP500 moved a LOT. moving averages do TERRIBLY in environments where the market doesn't trend hugely in one direction. I think I talked about that a bit later.

On that note though, I still work with this, though my approach has changed dramatically. Its certainly possible to structure a trading strategy to fit your risk profile.

Nobody can win every time, but you can design the strategy to provide losses you are comfortable with.

Regarding tweaking buy/sell algos to predict future movement though, there's plenty of literature on that on both sides, so I won't really argue with you.

If you're itnerested, I recommend reading about high frequency algorithmic trading. You can also read my similar blog posts about why I think technical analysis is absolute drivel and the potentical justification for running a moving average algo.

its quite true that a lot of people do it. Its not ACTUALLY a profitable venture in the sense that the risk-reward profile from a purely monetary standpoint is probably unjustified.

I did it for fun, to learn, to gamble, and hopefully get lucky. God knows I've spent money in worse ways before.

Regarding the theory that other players would jump in the market and cause the opportunity to go away: you're right, but they'd really have to parametrize the same strategy in the same way as you. thousands of people use moving averages already, but all parametrized differently so they produce buy and sell signals at different times.

There's certainly no ideal parametrization that is alawys profitable, as most research shows (and I tend to believe)

on that note, i lost over 1000 bucks a day for 3 days straight, which is when i quit.

and on having the "secret sauce" to beat the market. Read about Edward Thorpe. He's a badass. He wrote the book "beat the dealer" which was the bible on counting cards and beating vegas at blackjack.

Then he figured out how to price options (convertibles, really) and made a killing in his own hedge fund (Princeton Newport Associates, I believe).

He had the secret sauce, used it to make a killing instead of publishing it. YEARS later, black and scholes published the essentially SAME formula for price options and eventually won a nobel price for their work.

But Thorpe stuck to his guns and made his fortune. Merits to both sides, I suppose.